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Essential Things to Know When Renting
Renting a house may seem straightforward at first glance, but a deeper look reveals intricate details. Identifying a preferred location and setting a rental budget are just the first steps in the rental process. It is also important to allocate sufficient time for the house-hunting process, from searching through listings to shortlisting units and arranging viewings. Ideally, you should set aside at least two to three weeks to sift through available options. An increasing number of real estate agents are leveraging digital platforms to offer virtual viewings, which can also help save time in narrowing down the search and shortlisting desired properties. Here are the essential things to know when renting in Singapore.
1. Rental Budget and Lease Duration
Be sure to calculate and decide on your rental budget, taking into account other financial commitments and expenses to ensure you don’t overstretch your finances. The key is to live within your means and rent a property that is within your financial capacity. After deducting rent and expenses, your monthly income should still have surplus funds for savings and investments.
Once you have a clear budget, it’s time to consider the lease duration. The current minimum lease term for private residential properties in Singapore is three months, while for HDB flats it is six months. Nowadays, most people sign a one- or two-year contract, which gives them the flexibility to renegotiate lease terms upon renewal or when moving to a different property.
2. Location, Residential Area
Select a few of your favorite locations/neighborhoods or those you find to have a good living environment, and clarify the reasons for your preference. Consider the following points: rent, convenience of living; transport connectivity; number of amenities within walking distance, commute time to work or school, personal privacy, and the surrounding environment (for example, are there any major construction projects nearby?)
Local private residential properties can be divided into three main sub-markets: the Core Central Region (CCR) in the city center, the Rest of Central Region (RCR) on the city fringe, and the Outside Central Region (OCR) in the suburbs. As expected, rents in the CCR tend to be higher than in the other two sub-markets.
3. HDB Public Housing vs. Private Condominiums
There is a wide variety of property types available for rent in Singapore, with two common ones being private condominiums and HDB flats. The choice between the two depends on individual budget, lifestyle preferences, and housing needs. Generally, renting an HDB flat in any given area is more economical than renting a private condominium. However, public housing does not have facilities, unlike private condominiums which are gated and fully equipped. Therefore, if facilities like a gym, swimming pool, tennis court, function room, and barbecue pits are important to you, a private condominium should be your top choice.
4. On-site Viewing
Once you’ve identified a property you like, you might have other concerns, such as noise issues. At this point, you can choose to view the property again on different days and at different times to get a better and more comprehensive assessment of the actual living environment. For instance, there might be more car noise and roads might be more prone to traffic jams on a weekday morning compared to the weekend.
If you have any doubts, don’t hesitate to ask and resolve them on the spot. If you are only renting a room, you can ask the landlord if you can cook in the kitchen or if visitors are allowed in the home. Other similar questions include whether pets are allowed, and whether the unit is unfurnished, partially furnished, or fully furnished. It should be noted that fully furnished apartments often command higher rents.
5. Thoroughly Understand All Details of the Lease Agreement
Before signing the lease agreement, be sure to read the terms of the tenancy carefully and discuss any unclear points with the landlord for confirmation. It is advisable to hire a professional real estate agent to assist you. They can provide advice on ideal locations, the negotiation process, and evaluating the terms of the contract. Some common issues may relate to the security deposit or the diplomatic clause for expatriates renting in our country.
Prospective tenants should also confirm the process for handling rental matters with the landlord to address issues such as maintenance and repairs during the lease period. This includes how to contact the landlord, response times, and who will bear the cost of repairs.
Once a unit is selected and rented, the tenant should clearly document the original condition of the property upon handover in writing, supported by photos/videos as evidence. Documenting all rental details in black and white will greatly reduce potential disputes when the lease expires and the unit is returned.
What Should Tenants Do in a Landlord’s Market?
If you are looking to rent an apartment in the current market, you may have to pay a much higher rent than a year ago, as rental demand has outstripped the supply of available properties. Let’s delve into the details of the rent increase and what prospective tenants need to know!
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1. Why are rents still rising?
- Several factors contribute to the strong private residential leasing market. Demand for private condominium rentals is supported by various sources: the return of the expatriate workforce, tenants waiting for their new homes to be completed, or those who are temporarily unable to afford a home and turn to renting instead. On the other hand, as property prices rise, some homeowners may choose to sell their properties to capitalize on capital appreciation and decide to rent temporarily while re-evaluating their personal real estate plans.
- Furthermore, some co-living operators are also active in the condominium rental market, leasing units to offer co-living space options. These various sources of demand have driven rental growth. It is worth noting that some expatriates may be willing to pay higher rents to secure their desired rental properties, thereby pushing rents up.
- Data from the Urban Redevelopment Authority’s Realis system (URA Realis) shows a comprehensive and significant increase in average monthly rents between April-May 2021 and the same period in 2022. The largest increase was seen in five-bedroom units, with a 39% year-on-year increase in April and May 2022, reaching an average monthly rent of S$12,951. Meanwhile, compared to the same period last year, the average monthly rent for one- to four-bedroom private condominiums grew by about 14% to 16% in April and May 2022 (see Table 1).
- It is important to note when interpreting this data that these figures are averages, and the rental increases for individual lease transactions can vary greatly. For example, according to feedback from PropNex agents, it is not uncommon for landlords to raise rents by 30% or 40% amid strong rental demand.
- Given the tight supply of rental properties, rental amounts are expected to remain high and could see further increases for the remainder of the year. At the same time, inflationary pressures and rising interest rates may have some impact on rents if landlords choose to pass on the increased cost of living to tenants.
Table 1: Average Monthly Rent for Non-Landed Private Residences
2. What are the popular rental districts in Singapore?
- Although slightly lower than the 36,942 leases in the same period of 2021, the leasing volume for the first five months of this year remained healthy with 34,306 lease contracts. Leasing demand is expected to remain stable for the rest of 2022. However, the limited number of available rental properties may constrain the growth rate of transaction volumes.
- It has been observed that rental demand remains strong across all market segments. Market observations suggest that expatriates, who may have more generous rental budgets, prefer larger homes in the CCR and RCR, especially those in convenient locations close to MRT stations and amenities.
- The most popular rental districts are mainly located in the CCR and RCR. Among them, District 9 is the most popular, closely followed by District 10 (see Table 2A). Although rental volumes in the first 5 months of 2022 have declined compared to the same period last year, this is likely due to a tight supply of available units caused by strong rental demand. The median rents in these popular districts have also increased by 10% to 15% over the past year (see Table 2B).
Table 2A: Top 10 Popular Rental Districts Ranking (Jan-May 2022 vs Jan-May 2021)
Table 2B: Median Rent in Top 10 Popular Rental Districts (Jan-May 2022 vs Jan-May 2021)
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Attention, Prospective Renters!
Delays in construction projects coupled with unabated demand have pushed up leasing volumes. In the current landlord’s market, many rental listings receive a nearly endless stream of inquiries within hours of being posted. With a ready pool of tenants, landlords will insist on their desired rent, leaving little room for negotiation. Landlords will also be more selective about their choice of tenants, knowing that there are many others waiting in line to rent from them.
The following rental tips may help you in today’s competitive market:
1. Calculate your rental budget in advance. After considering your monthly expenses and personal savings, determine the amount of rent you can afford.
2. Plan according to your personal needs and priorities. Create a shortlist of HDB flats based on your preferred location, property type, convenience, surrounding amenities, fully furnished/partially furnished/unfurnished units, and the required lease term.
3. Do your homework on renting. Evaluate recent rental transactions and the supply of available properties with a real estate agent.
4. Please have cash ready to pay the good faith deposit (i.e., booking fee), which is typically one month’s rent, when signing the Letter of Intent. Don’t forget to prepare the security deposit, which is usually one month’s rent multiplied by the number of years of the lease term.
5. Remember that tenants are required to pay rental stamp duty. If the lease term is 4 years or less, the stamp duty will be calculated at 0.4% of the total rent for the entire period.
In a fast-moving market, a moment’s hesitation can lead to a missed opportunity, so it’s very important to have all necessary information and cash ready. It is advisable to hire an experienced, reliable, and knowledgeable real estate agent to help you find a rental property and negotiate with the landlord.
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The Rental Market Remains Active
PropNex Research holds a cautiously optimistic view of the Singapore property market, including the housing rental market. Overall, Singapore’s Gross Domestic Product (GDP) is still projected to grow by 3% to 5% in 2022 (at the time of writing), and the economic conditions and labor market remain healthy. However, some downside risks to be aware of include global interest rate hikes due to rising inflation, a slowdown in global growth, and supply chain disruptions.
According to the URA’s private residential property rental index, rents for private residential properties grew by 9.9% for the full year of 2021. It is expected that rents will climb at a similar or even faster pace in 2022.
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